German luxury carmakers accelerate the charge into crossovers

By Paul Lienert and Andreas Cremer

FRANKFURT (Reuters) - German carmakers are expanding an industry charge into so-called premium "crossover" vehicles, seeking to tap demand for models that combine the functionality and cachet of sport utility vehicles (SUVs) with the comfort and performance of luxury cars.

BMW AG (GER:BMW) and Daimler AG (GER:DAI), the global luxury car leaders, each plan to expand its crossover portfolio to seven vehicles by 2020, according to European supplier sources, with new entries in multiple sizes and price points.

Volkswagen AG's (VW) upscale Audi subsidiary will be nipping at their heels, with a future lineup of six crossovers, those sources added.

Nearly one in every four premium vehicles sold last year in Europe was a crossover or sport utility model, and the category continues to grow, despite concerns about size and fuel consumption, according to UK-based consultancy LMC Automotive.

Why the boom? According to BMW development chief Herbert Diess, crossovers "have a strong appeal and convey a certain sense of lifestyle. People want to set themselves apart from the mainstream."

Peter Fuss, a senior partner and automotive specialist in Ernst & Young's German practice, added: "Consumers want more premium quality ... And crossovers have a more modern design."

The surge in new German models is part of a broader trend, as VW, BMW and Daimler reap the benefits of investing through a six-year European car market slump.

But this month's Frankfurt car show will signal they are not alone in trying to grab a slice of the premium crossover market.

Britain's Jaguar, now owned by India's Tata Group (NSI:TATAMOTORS), studied then scrapped plans to develop a luxury utility vehicle more than a decade ago. Now, it is teasing a future crossover - its first ever - at Frankfurt with the C-X17 concept.

The wagon-like hatchback is said to be a precursor of Jaguar's Q-Type, which is being jointly developed with a new compact sedan that Jaguar expects to pitch at the BMW 3 Series.

The Q-Type crossover - it may also be called XQ - would be targeted in 2015 at the BMW X3 and Audi Q3 crossovers, suppliers said.

Japanese brands Lexus and Infiniti, owned respectively by Toyota Motor Corp and Nissan Motor Co, are trying to muscle deeper into the segment, too - Lexus with its LF-NX "concept," a sneak preview of the brand's first compact crossover, and Nissan's Q30 concept, a small hatchback that is likely to morph into a crossover derivative.

The LF-NX is expected to reach production in late 2014 or early 2015, and is likely to be offered with an optional hybrid powertrain similar to the one in the Frankfurt concept.

GERMAN DRIVE

The Q30 concept shares underpinnings with another new entry in the sector, the Mercedes-Benz GLA, which goes on sale in Europe next spring and soon after will be shipped to North America and China.

The production version of the Q30 is expected to go into production in 2015 at Nissan's Sunderland plant in Britain and eventually may be built alongside the GLA at Nissan's Aguascalientes plant in Mexico.

The arrival of the GLA signals an escalation of Daimler's crossover expansion. That effort is being built around two platforms, one known internally as MFA (Modular Front-drive Architecture), the other MRA (Modular Rear-drive Architecture).

The smaller MFA platform that underpins the GLA and the Q30 may also be used as the base for an even smaller, lighter and less expensive Mercedes crossover in 2017 that is known inside the company simply as the Baby G.

The larger MRA platform could serve as the foundation for as many as five future crossovers, including replacements for the current GLK in 2015, the ML in 2017 and the GL in 2018, supplier sources said. Also in the pipeline are two coupe-like variants, the MLC in 2015 and the GLC in 2016.

"We have a goal to launch 13 new models including crossovers by 2020," Mercedes spokeswoman Bettina Singhartinger told Reuters, declining to be more specific.

BMW has similar aspirations for its crossover portfolio. Its next new entry is the X4, which was previewed in concept form earlier this year at the Shanghai show and which is slated to go on sale in 2014. The X4 joins the existing X1, X3, X5 and X6, all of which will be redesigned over the next five years.

BMW also is looking at two additional crossover models - a compact two-door called X2 in 2016 and a long-wheelbase, ultra-premium four-door dubbed X7 that could arrive in 2018-2019 as a companion to the new Rolls-Royce crossover planned by BMW's British subsidiary.

Without commenting on specific plans for future crossovers, BMW's Diess said: "We've been leading the segment for some time. I'm pretty confident that we'll continue to come up with new ideas here."

Audi, meanwhile, has scaled back its ambitious growth plans in crossovers, suppliers said, having shelved proposals for the coupe-like Q2 and Q4.

Its three existing crossovers are being overhauled, starting with the big Q7 in 2014. It will be followed in 2016 by the next-generation Q5, which will be assembled at Audi's new $1.3-billion plant in Mexico, and the redesigned Q3 in 2018.

Still in the planning stage are two larger models, the Q6, a coupe-like companion to the next Q5 which also could be built in Mexico in 2016-2017, and the Q8, a sportier sibling to the redesigned Q7 that is expected in 2015.

"We're planning further additions to our portfolio of SUVs but have not yet communicated any details," an Audi spokesman said.

(Editing by Mark Potter)